Mexico creates watchdog to head off financial crises
Published: Jul 29, 2010 00:19 Updated: Jul 29, 2010 00:19
MEXICO CITY: Mexico created a board of regulators on Wednesday to identify future dangers to its financial system and head off crises like the global market meltdown of 2008.
Mexico is one of many countries beefing up financial regulation after ineffective rules and implosions on Wall Street helped trigger the worst financial crisis in decades.
Mexico's Financial Stability Board will coordinate the response of government agencies to systemic dangers to the financial system, President Felipe Calderon and Finance Minister Ernesto Cordero told a news conference.
"This board will have the authority to supervise institutions in an integrated way and consider the viability of individual financial entities and the system as a whole," Calderon told reporters and banking executives.
Creation of the new board may be unwelcome news for some Mexican bankers, who already worry that relatively strict rules in Latin America's No. 2 economy could become too tough.
Mexico's banking sector is dominated by international giants including Citigroup, Spain's BBVA and Santander, HSBC and Canada's Scotiabank.
Banks in Mexico and other emerging market powerhouses like Brazil weathered the financial crisis fairly well because they had no exposure to subprime housing loans, but their credit card businesses and consumer loan portfolios were pinched by defaults as unemployment jumped.
The board "will allow for the early identification of situations that could endanger the stability and solvency of the Mexican financial system," Cordero said.
Mexico, Brazil and other emerging market countries suffered home-grown financial crises in the 1990s that taught regulators and bankers lessons that helped them ride the 2008 meltdown that began in the United States.
As the European Union struggles to keep Greece's financial crisis from contaminating other economies, regulators in Mexico already hold banks to strict standards compared to many developed countries.
The Group of 20 wants a wide package of financial reforms, known as Basel III, introduced at the end of 2012. The new rules would toughen up capital requirements and introduce new minimum global liquidity standards for the first time.
Guillermo Babatz, head of Mexico's National Bank and Securities Commission, told Reuters in May that tighter global capital requirements will have little effect on Mexico's banks, which already adhere to strict rules.
He said the more pressing challenge for Mexico is the creation of better rules to ensure bank liquidity.
The Financial Stability Board's members will include officials from the central bank, the finance ministry, the IPAB deposit insurance agency and the National Banking and Securities Commission.
Cordero also highlighted rules enacted last year to increase banks' reserves against losses in their credit card portfolios. In 2011, similar rules will be applied to increase reserves against consumer credit and mortgages.
Mexico will also unveil regulations reducing the amount of money banks can lend to their controlling shareholders, Cordero said.
